Should The FICO Score Be Eliminated? SoFi Creates A FICO-Free Loan Application

FICO Score Is Becoming UselessWhen I got rejected from my mortgage refinance in early 2015 I was pissed. I was in the third month of waiting before I got the bad news. I had locked in an outstanding 2.25% 5/1 Jumbo ARM rate that could have saved me $400 a month for the next five years. Having an 800+ Experian FICO score and a multiple six figure income was not good enough because a large portion of my income came from freelancing. Traditional banks require two years of freelance income history before ANY of it counts.

In 2012, another mortgage refinance almost got derailed. TransUnion, one of the major credit agencies, unbeknownst to me, had my FICO score down to 680 because a former tenant forgot to pay an $8 utility bill after moving out. PG&E, the utility company, didn't bother to shoot me an e-mail, give me a ring, or send me a letter for the outstanding invoice. Instead, PG&E sent my name to a collections agency! Luckily, I got PG&E to write to my bank a “clear credit letter” and my refinance went through.

My 800+ Experian FICO score didn't help me get a mortgage refinance, and my 680 TransUnion FICO score almost screwed me. Back then, it was clear to me that the FICO score was seriously flawed. Therefore, I was happy to hear SoFi, one of the leading online lenders who raised $1B in funding in 2015 from Softbank, decided to completely drop the FICO score from its loan qualification application for 2016 and beyond.

FICO-FREE LOAN QUALIFICATION

Instead of using FICO scores, SoFi considers three criteria — employment history, track record of meeting financial obligations and monthly cash flow minus expenses — to determine if an applicant is qualified for its loan products. These include student loan refinancing, mortgages and personal loans.

Dan Macklin, a co-founder of SoFi, writes about why they are dropping FICO.

“The FICO score calculation doesn’t consider things like your savings, your cash flow, your ability to pay non-credit bills like water and electric or your future earnings (for example, if you just landed a job with excellent pay). Plus there’s the fact that a growing number of millennials are forgoing credit cards entirely, which is reflected negatively in their credit scores – even though they may be perfectly able to pay off a loan. All of these factors can have a major impact on your creditworthiness, but your FICO score doesn’t take them into account.

Because of these gaps, SoFi has chosen to not use FICO scores when evaluating the financial wherewithal of applicants. We still consider your track record of meeting financial obligations, but we also look at a more complete picture of your financial situation than what your credit score can provide.

That means considering factors like employment history and monthly cash flow minus expenses. We’re taking a more holistic view of our applicants’ financial wellbeing – and where they’re headed – and we’re learning much more than a three-digit number would be able to tell us.”

Let's go through SoFi's three criteria using me as an example to see if they make sense.

1) Employment history. Check! I was employed for 13 consecutive years at a couple major investment banks until 2012. From 2012 until now I've been self-employed.

2) Track record of meeting financial obligations. Check! I have never missed a mortgage payment in 12 years. I have missed three credit card payments in 16 years by accident (traveling usually). All late payments were forgiven as I paid my credit card bill the moment I realized I was late, which was always within a week of the due date.

3) Monthly cash flow minus expenses. Check! I've been saving over 50% of my after-tax income every month for the past 16 years. In other words, my monthly gross income is triple my expenses, and my after-tax income is more than double my expenses.

Based on these three criteria, I should have qualified for a mortgage refinance in 2015. By now I would have paid at least 12 on-time monthly mortgage payments. But Chase decided my finances were not good enough, even though my monthly cash flow would have increased a further $400 if the mortgage refinance went through.

Qualifying for a loan is just one step, but the hardest step. The next step is to qualify when there's a low enough interest rate to take.

Check out Credible, a student loan marketplace that has qualified lenders competing for your business. Credible provides real rates for you to compare so you can lower your interest rate and save. Getting a quote is easy and free. Take advantage of our low interest rate environment today!

TRADITIONAL BANKS NEED TO EVOLVE

The reason why traditional banks are performing poorly is because they are using archaic systems to underwrite new loans. The world has changed folks! Think about the below three situations, which are highly underserved by banks today:

1) How do you determine whether a new MBA graduate with tremendous upside potential is creditworthy if they don't have a long credit score history?

2) Why is it that FICO is so inflexible that it cannot consider the non-US credit history of  a nonresident? Is it really reasonable to view a nonresident as high credit risk just because s/he has never taken out US credit when they might have owned a home and a credit card for 10 years already? 

3) Why is someone with $300,000 in freelance income less creditworthy than someone who makes $120,000 year at a day job that isn't any more secure? Freelancers can, and often do, earn more money than those who work day jobs. 

Not figuring out a way to serve the above three customer types is absurd. I'm very bullish on the way many new fintech companies are going about lending money to consumers. They're developing new algorithms based on real-time data to make better lending decisions. Better lending decisions mean lower borrowing costs. Banks, the credit card industry, and the usurious payday loan industry need to be shaken up.

I do wonder how new fintech consumer lending companies will fare in an extended downturn since almost all of them were created after the 2008-2009 financial crisis. Lower interest rates are great for the borrower, but that also means profit margins are also much thinner. As a borrower, you want to take advantage of the current disruption and get the lowest interest rate possible!

Recommendation: If you plan to take out a mortgage through a traditional bank, you can check your Experian FICO score and credit report here. It's still a good idea to see what your score is before finding out months into a mortgage refinance. Refinancing a mortgage in 2017 and beyond is quite stressful now due to all the rigorous requirements.

Updated for 2020 and beyond.

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48 thoughts on “Should The FICO Score Be Eliminated? SoFi Creates A FICO-Free Loan Application”

  1. I applied for a SoFi personal loan (to be used for a business venture), and couldn’t get them to complete my application. I kept getting emails to upload the same documents they already had. I called twice and both times was told my application was complete, that it would be reviewed (though no timeline as to when that would happen was ever given), and then subsequently got an email asking for a document that I’d already submitted.

    I ended up getting a loan from my credit union – it took them 4 days to fund. After 3+ months, SoFi closed my application.

    If that’s the future of finance, count me out.

  2. Sorry to hear that. I know in Canada. It is very hard to get financeing once you have your own company, you have to have a history of two years. I faced this last year where i couldn’t finance a condo through an A lender so I had to be my own bank!

    I don’t know if it’s the same as in the states, but you can open a holding company and transfer funds through your company without tax implications and basically become the bank.

    I’m hoping that in two years, I’ll be able to do that.

  3. I’m less torn on the discarding on the FICO score and more on the statement about “caring more about the future than the past” or whatever (writing this on the bus going to work makes scrolling up the page hard). Just because someone just got a new job doesn’t mean he or she will still be making that money six months from now. I have a lazy friend who just got his first real job; I give him less than two weeks before he starts considering quitting.

    The FICO score has flaws-it’s of them–but banks don’t rely solely on it. They rely on income and employment history. As a matter of fact, Sam, it seems like Chase didn’t put ENOUGH emphasis on your FICO score.

    What traditional banks need is looser underwriting standards. And what I mean by that the ability of an underwriter to look at the story the numbers don’t tell and incorporate that into the decision. After all, would you buy a stock without knowing what the business sells, even with years of increasing cash flow, earnings, and dividends, and a clean balance sheet? Bank underwriters shouldn’t do what’s essentially the same then.

    I understand the need for two years income history, ESPECIALLY for freelance work. Just because the past couple months have been profitable doesn’t mean anything to tube long term. My second job isn’t even freelance and I still see the work drying up and am unable to make the hours that I need each week. But just because you lack two years of freelance income doesn’t mean that that income should be AUTOMATICALLY taken out of the picture.

    Like you said, Sam, it would be interesting to see how well SoFi weathers a financial crisis. They may well come out on top if their underwriting philosophy works.

    Sincerely,
    ARB–Angry Retail Banker

  4. I am glad that some Australian banks seem to be willing to take other factors into account. I recently went to a smaller bank who was happy to consider income after only one year of freelancing. They would also take into account household income even if the loan was only in the name of one person (which can be good for tax reasons). I was pleasantly surprised, but don’t know enough of the details or other lenders practices to know if it is common place.

    1. fun in the sun

      Australia is in one of the largest property bubbles in history, which is looking very close to the peak. I would not use Australian bank lending standards as a good example.

  5. I can attest to the fact that new fintech companies like SoFi are certainly making the application to approval process easier. I applied for student loan refinancing with SoFi and Earnest, and found out in a couple of weeks that I was approved and what my rate would be. I went with Earnest since they had a lower interest rate and were a little more customer friendly, but traditional banks should take notice.

    And I think they will. As the saying goes, Evolve or Die. And I don’t see Chase or Bank of American dying anytime soon.

  6. In the process of getting pre-qualified for a mortgage, I found out my FICO score was ~690. I was sure that was an error, but no, it was correct. Upon investigating, it was due to dispute with an $85 medical bill. We were told insurance was going to cover the nebulizer for our daughter, and when the bill arrived, we set it aside to begin the series of phone calls between the device company and the insurance company. A few late notices arrived, and each ended up in our to-do pile. When we got a letter stating it was going on our credit report, we just caved, and paid the $105 (including late fees).

    I learned in my pre-qualification process that it was too late. Whether I paid my bill in collections or not, my credit was impacted for 7 years. The only action we could take was to plead/beg for the medical device company to remove the charge from my credit report. We did beg and plea, going through the standard phone operator, and eventually a manager, and as a 1 time courtesy, they would take it off my report. If the manager was not in a good mood that day, my mortgage rate would have been about half a point higher, and would have cost me over $29,000 of extra interest charges over 30 years.

    The FICO score system is broken when I pay all mortgage, car, credit card, student loans, and utility bills on time, but when 1 $85 bill is paid late, it impacts your credit score for 7 years.

    1. Yikes! Your situation was like mine, except mine had a happy ending b/c the utility company was in the same building as my mortgage bank and my handler knew someone there! My bank sent a “clear credit report” to handle the situation.

      The FICO score is here to stay for a while, but there is a gradual shift. It’s your exact situation which makes checking your credit report and FICO score BEFORE taking out a mortgage or any big line of credit worth it. Folks can check their latest Experian credit score here.

  7. Nuclear Real Estate

    Love to see this, I only hope that this can be expanded to South Carolina, and hopefully investment properties.

    We are exactly the type of folks that traditional mortgage math misses the boat on. I have a decent W2 income, but a good amount of my compensation is structures as living allowances, bonuses, etc, the wife is in private practice (non-W2) and we have a number of high cash flowing rental properties. By traditional mortgage math my non base salary compensation is not counted, her income is not counted, and the rental properties have the double whammy of not counting the positive cash flow, and killing our DTI.

    It’s just crazy to think that in 5 years we could be saving $20k cash / month even after maxing out 401k and 529 contributions, but only be able to qualify for a $500k mortgage… Hopefully Sofi is successful and expands by then

    1. The banks aren’t willing to count any of your rental income? Are you sure? I only ask because I’ve talked to at least a couple of banks out here about it. I’ve been told that if you’re a newbie landlord taking out a loan to buy your first property, they often won’t count rental income because they assume you don’t know what you’re doing, and in that event you do get the double whammy of the investment property mortgage going against your DTI. But if you have at least two years’ landlord experience and can show that you’re earning real income from the rental properties, they should count net rental income as income. I’ve heard this from Union Bank of California (probably not in your area) and Bank of America.

        1. Wow, Chase has some strict policies. I mostly use BofA (I know many hate them, but they’ve been pretty good to me). BofA has always counted my rental income as income, without looking at how long a particular tenant has been there. They just applied a conservative vacancy rate of about 10%, if I recall correctly. My actual vacancy rate was 2% or less, but that was their policy in my zip code.

          Union Bank said they don’t look to the length of the tenancy, but they look to the experience of the landlord. They said 2 years’ experience was their threshold to count the rental income as income. They probably apply a discount for vacancy rates, too, but for sure it’s not a 30% discount.

          1. Nuclear Real Estate

            They do credit 75% of the rental income, which still provides solid net income to be credited, but not nearly reflective of the blended average cash flows I have received over the past several years.

            The bigger hit is to DTI. My personal opinion is that debts associated with an income producing asset should be treated differently than non income producing assets, and not impact DTI other than impacts to net income.

            1. I totally agree. I think if they’re counting only 75% of the rental income as income, they should see if the property is cash flow positive at that rate. If it is, then I think they should disregard the investment property mortgage entirely, since it’s obviously self-supporting. Maybe that’s a new niche for a bank to enter.

  8. I agree the score is flawed, but I wonder if it’s efficient to essentially perform a “manual underwriting” for everything?

    Certainly, the lack of manual underwriting created an underserved market (freelancers, self-employed, retirees, etc.) which allowed services like Sofi to offer a product to borrowers they perceive as safe, but I wonder if that makes sense for the broader population?

    Given most people are in fact employees, that may be the most effective way to reach scale in underwriting. GOod thing too… as that creates opportunity for new services to fill a need!

  9. The FICO credit score is only used as one piece of the approval process, sounds like SoFi is trying to pull in the other parts (employment, DTI, etc.) which lenders ask for anyway.

    FICO as the *only* factor in creditworthiness would be a mistake but no one is doing that. They may rely too heavily on FICO and miss good customers on the margins (marginal credit scores but score highly on other numbers like low DTI, stable employment) but that’s loss aversion for you.

    1. DeniedVeteran

      My situation as to why my FICO score declined was I became disabled in 2005 and my wife was already disabled. In 2006 she was diagnosed with Cancer and since she was under Medicare it only covered about 20% of the cost for treatment. The rest we had to pay. I had a small lump payment due to my disability and yet this did not cover the cost. We made arrangement with the hospital where she received her Cancer treatment. Problem was the total monthly cost for repayment exceeded what we had in our savings and checking account. We ended up using our credit card to help make the payments and yet this started the spiral downward. We ended up with other medical costs. The end result caused us to miss a few payments. After paying off the hospital bills in 2009, I have made all payments on time, but the mortgage companies did not take this into account or that I am a disabled Veteran (though I do not consider that I am a disabled Veteran as a reason).

      I have attempted to apply for a 15-year fixed mortgage and been denied a couple times. As a result I have entered a lease-to-own with the landlord. The excuse always is that our FICO score was not high enough. I know that since the collapse of 2008 the banks and mortgage companies tightened up on which FICO score they were going to accept. The numbers is sometimes as low as 650 but most were in the mid 700s to perfect score.

      Based on your statement, “FICO as the *only* factor in creditworthiness would be a mistake but no one is doing that. They may rely too heavily on FICO and miss good customers on the margins (marginal credit scores but score highly on other numbers like low DTI, stable employment) but that’s loss aversion for you” is incorrect.

  10. Interesting to hear they no longer pull FICO scores – what metrics do they use instead? I would imagine this borrowing would still affect your FICO credit scores though, and isn’t completely outside of your credit history say like a 401(K) loan?

    Really makes sense to go after this market – so many people don’t have the greatest traditional credit histories but nevertheless are perfectly capable of paying back a loan. I recently met Mike Cagney (co-founder and CEO) at an event and he made a comment to the group about thinking outside the conventional box – glad they’re making moves like these to give options to market segments that might have previously been untapped, instead of just focusing on the biggest and most obvious crowds.

    1. Hi there – SoFi here. Check out the FAQs section of our website: . The section under the FICO Free Zone has a lot of great info and answers to common questions about our decision to go FICO-free.

  11. Several mortgage companies around the nation still do manual underwriting (looking at employment history, ability to pay rent/bills for last 2 years, etc) without the great FICO score. Say there is someone out there who has never borrowed anything in the last 5 years but had $2 million in the bank…their FICO would be 0 and denied traditional mortgages / loans based on some low level lackie seeing the FICO was 0 or technically “undeterminable.” Banks need to enter the current world and see borrowing money to pay it back to build a FICO score to borrow money is a self licking ice cream cone and not indicative of a persons wealth and ability to pay bills.

    1. Ha. Seriously. Once I learned the equation for the score I was able to do some fast financial engineer (pay down some balances, open a card or two, become an authorized user, etc…) and went from lame to great. Its dumb in that nothing made me any better of a risk.

  12. Interesting approach, but ultimately it all comes down to evaluating your applicant. Any loan officer is more interested in protecting his job which means evaluating by the numbers, whatever those numbers are – FICO, or their own internal metrics.

    Part of the problem is the banks have swung so hard the other direction. I was approved for an extremely large mortgage in 2004 when I was self-employed for only 5 months. I should have realized that was the writing on the 2008 collapse wall. Now banks are being overly conservative, but it’s only a matter of time before they swing back to their usual greedy direction.

  13. SoFi’s approach is very ahead of any modern banking system. How does SoFi compare to Earnest which is doing a similar thing for student and personal loans?

    1. I think Earnest (never hear about them) is a tiny baby brother of SoFi. As a financial consumer, I want to stick with the largest players in the business with the most funding.

  14. It’s interesting that there’s the trend to get rid of FICO. I think there is value in the FICO score but there are other aspects that are good to consider too. The check of monthly cash flow minus expenses is a great one. So many people are so bad at that and end up drowning in debt when they get access to credit.

    1. The problem with FICO is the way the score is generated is so bland and divorced from personal assets it isnt a great overall picture or risk. It gives you buckets of risk and likelihoods, but Im sure its not broadly applicable. You could be 18 and piggy backed onto smart parents with excellent credit but no job etc…..and have a great score. You could also be a multimillionaire with no debts, no cc’s, no installments, etc…and have an average to lame score. Its useful but not as predictive widely as you’d like.

      In all honesty I think the other item is cost, the credit bureaus have been running a racket for a long time and people are tired of them. Especially since better, more predictive data is now out there for cheaper.

      The other odd rule to me was always the debt to income ratio. 36% is great and fine, but at some point you have to look at the nominal values to make sure its not an absurdity. When I first started (a 1099) we had all kinds of difficulty, and this was one of them. Drove me nuts since student loans made our number like 40-45%, but since we were looking for very reasonable houses, the left over allotment of money on their calculations was like 6x the mortgage payment. 36% may be an issue for someone that brings home 4k/month on a stretched home, but not for someone at 30k/m buying a house less than their post tax income. Crazy.

      At one point I told the bank, who we have our investments, etc…in, look, you can see all our accounts, theres more in there than this mortgage if all else fails you could liquidate my accounts…(obviously not totally true but was trying to bring them back to realityville).

  15. Very interesting! I like SoFi’s approach, for sure. I wonder how they calibrate the “track record for meeting financial obligations” without using FICO. Do they use credit bureau data but just rank it in their own way? That still wouldn’t account for on-time utility payments which aren’t reported to the credit bureaus.

    I wish the lenders would use track record of actual payments/savings made instead of capping me at artificial loan payment to income ratios. If I’ve been paying $3,600 monthly payments toward my mortgage for several years, then I would like to see a lender say “Hey, you obviously can swing a large monthly payment like that” regardless of the ratio being a tad high.

  16. Metrics that aren’t accurate for effective decision making don’t serve borrowers or lenders. SoFi’s approach seems simpler and more effective – especially for the “non-traditional” borrowers that could be their best customers. We paid off our mortgage several years ago. Instead of paying a mortgage we have loaned out money to others and become their mortgage bank. The three criteria that SoFi is using would certainly make me feel comfortable that I was making a good loan decision.

  17. i have a SoFi loan (personal) and they pull credit report just like everyone else. They have no clue how much a person has in savings just like everyone else (they never ask). Personally, dont see how they are so different. Maybe the source is different but as far as i can tell they use similar criteria.

    1. They no longer pull an applicant’s FICO. They just reported mid January 2016. I will ask them how they get the nitty gritty details though as I just played tennis with their a General Counsel on Sunday.

        1. Hi there, SoFi here. For pre-approval, we do a soft pull but we do not factor in FICO scores. But after that, we require more substantial documentation. Hope this helps! You can also call our team at (855)-456-SOFI anytime with questions about the process.

  18. Sam,

    You mention in several posts about how you constantly refinance, and are using ARMs as much as possible. I just locked in a 5/1 ARM from a 30 yr fixed, going from 4% to 2.675. its going to save me roughly $600 a month. however, what are you paying for closing costs? I was getting estimates of 9-12k of closing costs, so thats going to significantly impact the savings I wil lget from the lower rate. That, and you risk the rate going up after the initial period of the ARm expires, so maybe I can only get a 3.0% later, plus then I have to go through the whole process of refi again. So im trying to see if it’s really going to be worth it at the end… thanks!

    1. Those closing costs are outrageous! Like you’re trying to do, I refi’d from a 30 yr fixed at 4.625% to a 7/1 ARM at 2.875% with a local bank in May of 2015. Actual closing costs were between $2,500-3,000. We also slapped down an extra $7,500 cash toward principle to get rid of our previous PMI. There were a few other fees mixed in there (see Sam’s article about added costs of paying off a mortgage), bringing the total to right around $11k, but 70% of that was principle pay down/equity in our pocket. You should check with another bank or three before you proceed. The monthly savings are 100% worth it if you can get more reasonable closing costs.

      Good luck!

      1. Thanks Kendall. I did negotiate a little bit, and the out of pocket costs are going to be closer to 3-4k. this is a jumbo loan too, so that might make it a little more costly. here’s another question. everytime you complete a refi, it “resets” the clock persay, so you have another 30 years to amortize the loan, so thats probably how they reduce the monthly payments as well. but isn’t the problem with amortized loans that you pay a LOT of interest for the first few years? I haven’t done the calculations yet, but if you are paying tons of interest for the first few years, and then you refi again, aren’t you barely paying off principle, so making the fixed loan a little more attractive over the longer term?

        1. Killer job cutting your closing costs by 60-70%. “Re-amortizing”, so to speak, does seem to be a byproduct of refinancing, where your principal payment in the first month is the smallest it will ever be in the life of the loan. However, I noticed after my refi, the interest I paid each month dropped so drastically, and the amount going to principal increased slightly, that I didn’t feel that pain at all. When a lower payment=way less interest and more principal, sign me up.

          Another point to consider with the ARMs, you might not even need to re-fi if the rate adjustment isn’t significant after 5 years (or 7, 10, etc.). Obviously, we don’t have crystal balls but interest rates have been so low for so long that there is a possibility you won’t have to start over (although your bank will probably try to talk you into it)! A lot of ARM mortgages are also capped in how much the interest rate can rise each year so read the fine print!

          AND since mortgage debt is one of the most tax-friendly types of debt out there, the increased cash flow each month from my lower mortgage payment made resetting the amortization schedule well worth it. I can always pay down extra principal as I’m able/want to, but our plan is to take the extra monthly cash flow and finish paying my wife’s grad school tuition without loans and also plow what’s left into the market. Flexibility is the best thing my refinance offered me.

          What would you do with that extra $600/month?

          1. great reply. So i went and calculated the amortization schedule for both scenarios and while im already 3 years into this loan, the schedule shows that with the new ARM, I would be contributing a little less principle per year, up until year 4, but on the flipside, my interest would be considerably less. So what am i going to do with my 600/month, I still have not decided yet. With the market the way it is, I don’t have that much confidence that putting it into equities will yield me more than 2.625%, so I might just put the $600 into the principle. However, I might put it into an account like wealthfront, and use a more conservative strategy, and auto deposit for the next few years.

            1. I always run an amortization schedule and add extra principal payment to the schedule until the loan payoff date matches the loan payoff date of the old loan. Then you know the baseline payment you need to make to ensure that you’re not backsliding. You don’t have to make that extra payment, of course, but if you make at least that payment (or more), the compounding of interest can save you a ton over the long run.

    2. Those closing costs are indeed outrageous, unless you have a $5M+ loan you’re refinancing.

      I always shoot for a 2 year or less break even time period before I try to refinance. Shorter the better obviously. Then I make sure to own the property for at least 5 years.

  19. THANK GOD!!!!!!! About damn time. If something like this were in play 3.5 years ago I wouldn’t have had to take a job working for the man and put my own business on the back burner. It took me 3 years to get my company back to where it was previously. Long story short, Self-Employed individuals are treated like the plague by banks. I had a $200K/year contract with a year left on it and a 7 year work history with the same client. Banks flat out told me not to even try unless I get a W-2 job. 3 paychecks later I had a house. In hindsight I probably should have just stayed the course and saved more for a down payment but 3 children in a starter town-home and pressure from my wife to move can be a real motivating factor.

    I’m glad we have a livable house now but I don’t know if it was worth it. I think about the compounding effect and where my business could be now and cringe at the missed opportunities. Relieved I was able to get back to running my own show.

    1. Pretty damn ridiculous how contractors are treated as second class citizens right? By 2020, there will be more contractors than full time workers! Wake up traditional banks! The way people make money has evolved.

      I can’t believe you had to actually give up your business to get a W2 job for this loan. This is an example of where traditional banks hurt quality of life.

  20. Sam, I agree that traditional banks need to catch up with the times and not rely purely on FICO scores to determine credit worthiness. I was in a position a couple years ago when I was trying to purchase a new home with my wife, and because I couldn’t use my 6-month severance, or non-traditional income from the sale of my business, we had to rely purely on her income (which wasn’t a lot as a teacher). Nevertheless, we were able to squeak by, but the margin we would clear our debt service was in actuality much better than we were qualified for.

    I actually complained to the banker and was surprised that he agreed. One thing I was surprised to learn in that conversation, is there are loans you can get from traditional banks that are underwritten by looking at your overall net worth and asset base. While we didn’t need to go down this road, I wonder what kind of details that would have entailed. Anyhow, SoFi definitely sounds like a great idea and hopefully they can stimulate some change in the industry.

    1. The banker’s wrists are cuffed. S/he wants to less restrictions to do more business. S/he isn’t the one who is left holding the bag if a borrower defaults.

      I spoke with SoFi and they said a potential borrower just needs to upload their paystubs and ID. Compare that to the couple dozen documents I had to go through with a traditional bank.

      Therefore, my biggest wonder is what happens to this loans in a prolonged downturn. I know SoFi and other newer consumer loan companies focus on the prime borrower for the majority of business.

      I’m glad you got your loan approved!

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